Private Capital Monitor 30/06
30th June 2023
Craig Coben writes for the Financial Times on the rise of the phenomenon of newly public companies being taken private, coined “P2P2Ps” (private-to-public-to-privates). Coben notes that despite these companies often meeting expectations post-IPO, their shares have drifted downwards, making them prime targets for PE firms. This trend is seen as evidence of public equity market dysfunction, with newly-listed companies being undervalued. Theories behind this include portfolio inertia among public investors, an unsuitable shareholder base post-IPO, and IPOs being priced too high. Coben leans for policy reforms and reconsideration of IPO structuring.
Worth a read
Brooke Sutherland opines for Bloomberg on the escalating tug-of-war over flow-control technologies firm, Circor International, between private equity powerhouses, KKR and Arcline Investment Management. KKR’s $1.6 billion bid for Circor was countered by Arcline’s $57/share offer, prompting KKR to a full equity backstop and a $125 million reverse termination fee. This battle underscores the prevailing trend among private equity firms: favouring manageable targets amid economic uncertainty. Consequently, even companies like Circor, boasting steady if unspectacular growth, have become highly sought-after assets.
The Wall Street Journal reports that PE giants like Blackstone and KKR are focusing on smaller deals instead of megadeals due to volatile markets and economic uncertainty. The average value of PE-backed deals this year is the smallest since the global financial crisis. Smaller takeovers and add-on deals are popular because they require no debt and allow firms to continue investing. The overall value of private-equity-backed deals is down, but the number of transactions remains high. While smaller deals have disadvantages, such as slower investing and greater competition, they are seen as equally challenging as larger deals.
The Financial Times’ Lex reports on a study from Oxford’s Saïd Business School that suggests AI can identify qualitative factors in private equity fund documents, overlooked by human investors, which can account for a 25% spread in performance. Using natural language processing to analyse prospectuses since 2003, the research finds a correlation between language used and past fund performance.
Media of the week
Private Capital with Joe Reilly – Stan Miranda – Bains meets the Yale model at Partners Capital.
Stan Miranda is the Co-Founder and Chairman of Partners Capital, a global OCIO with $50 billion under management. Conversation consisted of the DNA of Partners, how they engage with their clients who are private equity partners, endowment heads, and substantial family offices.
Wall of money
The Financial Times claims the raise includes $6 billion from the Abu Dhabi Investment Authority.
The fund represents an increase of more than 50% on the firm’s previous fund and will invest in in seed and Series A funding rounds of startups across several sectors, including AI and machine learning, as well as enterprise software, fintech, ecommerce and edtech.
The close exceeds its target of $750m. New Mountain committed $100 million to the fund.
|Acquisition Target||Buyer||Seller||Value||Date Announced||Region||Sector|
|Qualtrics||Silver Lake and Canada Pension Plan||–||$12.5bn||29/06||North America||Software services|
|CLC Group Limited||HIG Capital||Carlyle and Stellex Capital Management||Armitage Family Trust||29/06/2023||UK||Property and Asset Refurbishment|
|Portland||Lone Star Funds||Carlyle and Stellex Capital Management||n/a||28/06/2023||North America||Maritime services|
|Nomios||Keensight Capital||IK Partners||n/a||27/06||UK||Cybersecurity|
|Apptio*||IBM||Vista Equity Partners||$4.6bn||27/06/2023||US||Cloud Financial Operations|
|ARAG Group||Nordson Corporation||Capvis||€960m||27/06/2023||Italy||Framing equipment|
|Parfums de Marly and INITIO Parfums Privés||Advent International||n/a||23/06/2023||France||Personal goods|
|Accedian*||Cisco||Bridge Growth||n/a||22/06/2023||Canada||Performance Analytics|
|Enstar AB||Segulah and Peas Industries||n/a||22/06/2023||Sweden||Energy Optimisation Platform|
*subject to regulatory approvals
Movers and Shakers
- Carlyle Group Inc. announced Patrick Siewert, Managing Director is stepping down after 16 years in Hong Kong to become a senior adviser.
- Antwort Capital has hired José Kabana as managing partner. Kabana previously worked at Permira, Lazard and Goetzpartners Corporate Finance.
- HIG Capital has appointed a new managing director, John Bruen from Macquarie Asset Management, to expand their infrastructure team.
From the Horse’s mouth
“Smaller deals are just as hard, if not harder, to do than big deals. It’s a lot more challenging and requires more diligence” – Jeremy Swan, National Director of CohnReznick’s Financial Sponsors & Financial Services Industry.
“Although the record-breaking numbers we saw post-pandemic may seem like a distant memory, there are reasons for cautious optimism” – Professor Kevin Amess, Director of CMBOR at Nottingham University Business School.
“I want to be able to look back and say, I’ve done everything I can, and I was successful.” – Michael Phelps, American swimmer & Olympic gold medal record holder, born on this day, 1985.